evenflow1969
Gold Member
Tightening of purses always goes to far just as the loosening of purses. The problem is we go from giving to many loans to not enough. Cash flow certainly helps new buisness get off the groun d and helps existing buisnesses stay competative. It is a big deal in creating and maintaining jobs. While purses are to loose buisnesses that should not get loans get them and when the purse strings tighten buisnesses that should get them do not. Banking worked for centuries very well when risk was managed appropriately- IE 80/20 loans. We were able to manage risk well for centuries under these guidelines it is when we go out side of these guidelines that things go bad. Cash flow is still king and if we want a vibrant economy some risk must be taken. They just must be well managed risks. Pretty simple from a real conservatives view 80/20 loans worked for ever, changing that did not work. Seems like a simple solution go back to what worked.I've thought about that, but I'm not sure. Because many of these loans probably shouldn't be made in the first place, their existence is only increasing risk. Just like sub-prime mortgages. Holy crap, the failure rate for small businesses is so high, I don't know how many of those loans would help. If the low-end lenders collapse, then, maybe the ripple effect wouldn't be too bad. Investors would be hurt, though.Wrong those of us that have dealt with under wrting in the past understand the swings they go through. They go from we will buy any thing to we wil buy next to nothing. Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.I have no idea. Why?I won't go so far as to call this a prediction, but there's a massive bubble brewing right now and I haven't seen anyone talking about it.
Remember those radio and teevee commercials in the 2004-2008 years that advertised low-document and no-document home loans, 125% LTV loans, bad credit mortgages, all the horrific SHIT that would get layered into CDOs and CMOs, avoid regulation, get phony AAA ratings by the paid-off ratings companies, turn to shit and ultimately damn near bring down the entire global economy?
Well, imagine those same types of loans for small to mid-sized business owners instead of home buyers.
It's damn near deja vu. Lenders are both proliferating everywhere, and dropping lending standards to a point at which they could barely be considered "standards". Because it's not a front-page thing like mortgages, this massive stew of bad credit is flying totally under the radar - YET, a business is FAR more likely to fail than is a home owner likely to pay their mortgage. They're everywhere now, the loans are going into larger securities, and here we are again.
Just saying.
.
How many fewer business loans compared to home mortgages?
.
Outstanding mortgages are currently about $14.7 trillion.
If people lose confidence in that market, start suffering defaults, that's a big deal.
If the small business loan market is $500 billion (I have no idea the actual size) and starts having problems
that could be an annoying hit to profits, without having any secondary effects.
I didn't find enough specifics below, maybe you can?
https://www.federalreserve.gov/releases/z1/20180308/z1.pdf
I haven't really thought through this end of it. This might end up being an educational thread...
.